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The Bank of America building in San Francisco was on a laptop found in Pakistan that confirms it as being a possible financial target of terrorists. However outside the building at California and Kearney Streets, there were no visible signs of increased security.
Photo by Michael Maloney / San Francisco Chronicle MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT less

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The Bank of America building in San Francisco was on a laptop found in Pakistan that confirms it as being a possible financial target of terrorists. However outside the building at ... more

San Francisco's iconic Bank of America Center could be on the block again -- this time for the staggering asking price of $1.25 billion.

Building owner Mark Karasick is seeking to sell the 52-story Financial District landmark less than a year after acquiring it from Bank of America and Shorenstein Co., according to Real Estate Alert, a closely watched industry newsletter. Eastdil Realty, the broker for Karasick in the previous BofA deal, declined comment and referred the matter to Karasick, who did not return a phone call.

If Karasick achieves the reported asking price on the 1.8 million-square- foot high-rise and annex, it would work out to $700 per square foot -- by far a record for a San Francisco office building.

The highest price to date was $501 per square foot paid in 2003 for 500 Howard St., also known as Foundry Square I. The buyer was a Utah state pension fund.

"If any single building in town can command (more than $1 billion), that's the building," Joe Cook, head of the Cushman & Wakefield services firm in San Francisco, said of the BofA tower. "When you get into that range, it's a rarified air in terms of who can afford it and make that kind of commitment."

The report of a possible sale comes amid a red-hot market for institutional grade real estate nationwide. During the past 12 months, about $4.2 billion worth of San Francisco commercial property has been sold or put under contract, according to Real Capital Analytics, a New York research firm.

Pension funds, foreign buyers, real estate investment trusts and real estate syndicators such as Karasick have continued to pour money into commercial property at a record pace, despite slow rent growth and declining yields.

"The institutional psychology for real estate is becoming similar to individual psychology," said John Dudeck of Guardian Equity Gowth in Los Altos. "They are reducing their expectation for cash flow and relying on pie-in-the- sky appreciation. They are playing into the greater-fool theory."

Karasick groups have made quick killings before, but not from a building as prominent as the BofA tower. Built in 1969, the distinctive reddish brown high-rise is considered the city's trophy asset. It even starred in a movie, the 1974 thriller "Towering Inferno."

The tower was co-owned for years by Bank of America and Shorenstein and houses investment bankers, lawyers and consultants. During the dot-com boom, the former owners put the building on the market for a reported $1 billion, but pulled it when there were no takers.

BofA rents are some of the priciest in the city, about $10 per square foot more than average Class A rent in the Financial District.

A recent lease with AIG Global Investors for 10,000 square feet on the 27th floor -- about the middle of the building -- was signed at a rental rate of $46.50 per square foot, according to Grubb & Ellis Corp. Rents in the upper stories are in the $50s per square foot.

The building is 96 percent leased. One of the choicest blocks available for rent is 25,000 square feet on the 50th floor.

Commercial rents in San Francisco are on their way up, but many leasing experts say they do not justify the high prices being paid for buildings. "Today's purchase prices are not based on today's rents," said broker Frank Fudem of BT Commercial. "They are based on extremely optimistic rent projections."

But if a buyer did decide to pay a super-premium for the BofA building, it may not affect the overall market, said Cook of Cushman & Wakefield. The average sales price for a Class A San Francisco office building is about $300 per square foot -- far below the price sought by Karasick.

"I think (the BofA's asking price) is awfully high, and it would be somewhat of an isolated event," Cook said. "I don't think it would tend to pull prices up."

On the block again

A New York investment group headed by Mark Karasick is trying to make a quick profit on the BofA tower. Here is what it has done in the past year.